BKFORUM, the leading bankruptcy message board with over 1 Million annual visitors, welcomes you to our community!

You are you viewing the Bankruptcy Forum as guest (limited viewing). If you don't have a BKF account yet, please REGISTER (takes 30 seconds) so you can post your own questions and see all the features available to the registered users.

BKForum is a strictly no-solicitation, no-spamming private community to discuss bankruptcy, credit, and other financial topics.

Announcement

Collapse

Forum Rules (Everyone Must Read!!!) (updated: 04/28/2015)

Welcome to the Bankruptcy Forum. Bankruptcy (BK) Forum is known as BKForum.com and will be referred to as BKF hereinafter. In order to ensure a long term success of our vibrant community, we have established certain rules and guidelines to which everyone must adhere to. Please take your time to carefully read our rules, before you start to participate in the community.

Things you agree to do:
BKFORUM.com (BKF) users agree to use the search function before starting a new thread. This prevents duplicate discussions and allows for better organized topics.

All BKF users agree to read the sticky posts which may be available at the top of a forum page. These Sticky posts often contain valuable information. They may also outline more rules and guidelines specific for that particular forum, stickies are put in place by that forums moderator(s) or admin(s).

Things you agree not to do:

All BKF users agree not to call people names or write a post simply to make a personal attack, or get a negative reaction; this behavior is not allowed on our forum. The use of derogatory language aimed at anyone will be severely dealt with. There is no need to agree with each other, or to even like each other. However, by signing onto BKForum.com you agree to treat each member and guest with the respect they deserve. No threats or personal attacks will be allowed.

All BKF users agree not to discuss, engage, or encourage any behavior or activity which violates the law. Discussion of drugs, violence, murder, theft, vandalism, fraud or any other issue which could be used to help individuals break the law is strictly forbidden.

All BKF users agree not to "bump" old threads, unless there is a specific benefit to the community by doing so. But in most cases, please don't post in very old threads, instead start new threads.

All BKF users agree not to attempt/use another members account. It is against BKF rules to use any account other than your own. Impersonating another member will result in an immediate ban. It is also against the rules to open more than one account in your own name without permission from a moderator or administrator. If you have been banned for any reason, it is against the rules to open another account. If you were banned temporarily and you are caught using another account you will be banned permanently. Choosing a moniker which is similar in either sound or spelling as a moderator or administrator is strictly forbidden.

All BKF users agree not to private message any moderator, admin, or other member with questions related to their personal circumstances (Questions about the forum or issues with the forum are ok). This forum only works when members share their experience and insights with everyone.

Things you agree not to post:
All BKF users agree not to post any derogatory/racist/or sexist remarks. This includes attachments, links and all information contained within posts, signatures, and avatars, failure to comply with this rule will result in a permanent ban.

All BKF users agree not to post any copyrighted or trademarked information without the express written permission of the owner(s) / proper citation of source.

All BKF users agree not to post any real names, addresses, telephone numbers, email addresses, social security numbers, or any other personal details (their own or other people's).

All BKF users agree not to post links, pictures, attachments, videos, or the like of pornographic content, objectionable material or extreme violence, whether cartoon or real.

All BKF users agree not to use BKF for advertising purposes without a written contract between yourself/company/agent and the administration of BKF. Blatant advertising will result in a ban.

All BKF users agree not to spam the forums. Spam includes but is not limited to posting erroneous, non-relevant-useless, off-topic, or meaningless posts. Spam may also include posts which contain no text, or large areas of blank space between lines. Simply posting emoticons without text is considered spam. BKF is the largest bankruptcy message board and all the content is intended to help other users. Please help us improve the quality of our forum by making sure that your posts are well-worded, spell checked, grammatically correct and syntaxed.

Regarding actions of moderators and administrators:

The forum is no place to air out your opinion or be judgmental of our staff and its capabilities.

All BKF users agree not to abuse or mistreat moderators or administrators. It is against BKF rules to post any information regarding bans or any other action taken by a member of the moderating or administrative team. If you wish to discuss bans or warnings please do so via PM. To place a complaint against a moderator, send a PM to a super moderator. All Moderators are equal, any decision made by a moderator must be adhered to. If a moderator tells you something you do not like, do not go to another moderator looking for a different answer. If you are caught doing this you will be banned. The moderators work as a team and respect the decisions made by their peers and will help enforce them unless an administrator tells them differently.
If you have an issue with how the forum is run, then notify one of our administrator and we will look into the situation. We have in the past and still do appreciate any input that you offer this forum. But critical input and/or judgmental postings towards the staff will result in you getting banned.

Should you find a thread offensive or out of line, then notify a Mod in a PM so they can evaluate the situation and do the action deemed necessary.

All moderators do have active "other" lives outside of the forum and help moderate this forum in their spare time throughout the days and weeks.

If you have a problem with a member or Mod follow the proper channels of reporting it.

BKF reserves the right to delete any posts which contain anti-BKF comments or discussion. Any bashing of moderators or administrators, or any of their discussion or actions will also be deleted, and the responsible posting party(s) will be banned. Any public anti-BKF advertising, communication, or posts on another forum will result in permanent bans as well.

All warnings and bans are decided by individual moderators and administrators. Warnings are preferable to bans however, for serious offenses and repeat abusers bans will go into effect. The length of the bans can vary from several hours to permanent.

All messages posted or sent including through PM are the property of BKforum.com.

All BKF users agree not to advertiser on the forum (Niether by posting, private messaging or using your signature). If you are a company/attorney/legal adviser wishing to advertise on the site or sell a product, you must contact the head administrator and inquire about our advertising packages.

All bankruptcy related opinions expressed on BKForum.com are those of their authors and not necessarily of BKF, its staff or representatives.

You agree not to copy any material/post/content from BKF without written permission from our head administrator .

By posting on this forum you agree to these terms and conditions, including any punishment deemed appropriate by moderators or administrators in the event of an offense.

Administrators/Moderators can change these rules at any time without prior notice.

"Short" Sale Information.

We frequently get questions regarding so called "short sales" of real estate. So I thought I would summarize some of the basic information.

What is a short sale?

A short sale occurs when a person with a mortgage attempts to sell their home, or any parcel of real estate, for less than what is owed on the property.

Can you do a short sale without approval from the lien holders?

NO. In order to complete a short sale, the lien holders (i.e. the mortgage finance companies) MUST agree to the short sale. You cannot, of your own accord, sell your real estate for less than what is owed. Why? Reason being, in order to pass clear title of the real estate to the buyer, ALL lien holders must agree to release their lien. The only time lien holders release their lien is if they have been paid in full, or if they AGREE to accept less than what is owed. In addition, I have been hearing that some lenders are requiring the debtor tp list their home on the market for a certain number of months before the lender will even entertain a short sale proposal (typically 90 days).

How do short sales work?

Typically, a debtor is approached by a real estate investor who offers to buy your home for less than what is owed. The investor will (should) also offer to negotiate the short sale with lender, directly (note, if the investor does not offer to negotiate, run away). The problem is, that negotiating short sales can take time...and the investor may want to lock you into some sort of contract...don't do it. But in essence, the bank will assign a person to evalaute the short sale and offers that come in. This process can take in excess of two months.

Are there any benefits to a short sale?

Generally NO, not to the seller. If the Bank is willing to accept a short sale, doing so can prevent a foreclosure, but for credit scoring a short sale and foreclosure are EQUALLY negative. A short sale is an adverse entry on your credit report; thus, unless the bank specifically agrees to not report (fat chance, I have never heard of a bank agreeing to do so, because they have other regulations and duties to make a report), there is little difference between a short sale and foreclosure for credit reporting purpose. So, generally speaking, short sales, yield little benefit to the seller.

Is there any downside to a short sale?

YES. For IRS purposes, a short sale represents a sale of an asset AND forgiveness of debt. As a result of a short sale, you will receive a 1099 and be expected to pay income tax on the amount of the forgiven debt. (i.e. the difference between what you owe and for how much you actually sold the property). In the alternative, the lender may keep the debt collectable and refer it to a collection agency. And no matter what any real estate agent tells you, if the lender decides to foregive the debt, they MUST issue a 1099, it is an IRS requirement. You should have the Short Sale agreement (which is seperate from the sale/purchase agreement) reviewed by an attorney. Real Estate Agents are not lawyers and cannot advise you about the content or implications of the short sale contract...remember, they are just looking for a commission.

Is there a way to get out of paying that income tax?

Yes. If you satisfy the IRS definition of insolvency, you do not have to pay income tax on "forgiven debt". The form you need is IRS form 982.

What about short sales and 2nd mortgages?

Short sales are an unlikely option when you have more than one mortgage and the 2nd mortgage is with a different lender than the 1st mortgage. The lien a 2nd mortgage has on your property is just as valid as the lien of the 1st mortgage; thus, you cannot simply sell your property for the amount of the first mortgage. Again, ALL lien holders must agree to release their liens in order to finalize the transfer of the property to the buyer.

In the long run, is doing a short sale worth it?

That is a difficult question to answer, but in general, since there is no benefit to the seller for doing a short sale, the anwwer is no. Also, for many people who consider a short sale, they have other debt problems and income short-falls such that a short sale does not solve their financial problems. As for credit reporting, a short sale is no different than a foreclosure, the same FHA/HUD and Frannie/Freddie guidelines apply for short sale as for foreclosure.

What should I do if I am approached to do a short sale?

Be leery. After all, the person approaching you to do a short sale is a real estate investor looking to pick-up your property below market value, or who does not want to face competition at the foreclosure auction. Avoid signing any contract with an investor that would require you to take your home off the market or otherwise force you to refuse any other offers while the investor attempts to negotiate the short sale with the lender.

General advice.

DO NOT pin your financial future on your ability to complete a short sale on your home. Short sales are actually fairly rare and generally do not solve your underlying financial problems. In all honesty, from a seller's perspective, I am hard pressed to think of any benefit to doing a short sale.

What about Short Sales and BK?

Short sales in the BK context are a wash. I suppose in the long run, there is an argument that doing a short sale before a BK might "slightly" improve your credit coming out of BK. But a foreclosure that is done within the context of the BK is viewed as a "single" negative (i.e along with the BK); thus, any benefit of the short sale vs a foreclosure, when filing BK, is negligible. Moreover, if you do a short sale within a BK, there really is no benefit to the debtor because if a bank agrees to a short sale, there is NO deficiency balance, and thereby no lingering debt that gets discharged in the BK. Furthermore, the BK is of NO help regarding the income tax liability that would be owed on the forgiven debt. The tax liability would be too new to be discharged in BK, so you would still need to qualify under form 982 to attempt to get-out-of paying the income tax liability.

What about short sales after BK on NON-reaffirmed mortgages

Not reaffirming your mortgages has no affect on how short sales work. The lien a mortgage holder has on property is valid regardless of the BK, thus, the lender must still AGREE to a short sale. If you do not reaffirm your mortgage, all that means is you are no longer "personally" liable for the mortgage. Unfortunately, there is one question I am not sure about the answer...is whether, in the context of a non-reaffirmed mortgage, would you have any income tax liability for the difference...I honestly do not know the answer for certain.

The "forgiven" amount in a short sale would not be taxable income if the mortgage was discharged in BK prior to the short sale. If you receive a 1099C you would file a form with your income tax return stating that the debt was discharged in BK and therefore excluded from taxable income.

You have no personal liability to pay a discharged mortgage. So, you would not have to pay the deficiency on a short sale.

From all reports, a short sale is a huge hassle for the seller with no benefit. Why not just let the lender foreclose and live in the house for free until title to the house is transferred to whoever buys the home at auction?

Leave a comment:

HHM, thanks for al your help! this question just hit at the right time, hope not to sound crazy. If I do a ss on a mortgage already cleared in BK, would I have to pay taxes on the difference? or take out a loan to pay the difference to the bank? I've been told both ways and I just thought I was cleared with the bk against both situations. Thank you, Larryt

Leave a comment:

I have an appt. Friday with my attorney to review C7 paperwork and assume we will file at that time. I plan to surrender my house (coming up on 5 months behind). I met with my realtor and decided to list the house as a short sale after labor day. Do lenders tend to "extend" the foreclosure process if the homeowner is attempting to sell the home on a short sale? I would suspect that it is less expensive for the bank to accept a short sale offer than to go through a foreclosure process.

Thanks!

Leave a comment:

There are other exclusions that you can use on form 593-C. Was this rental your principal residence at one time, like any 2 of the last 5 years? If yes, you're exempt from the 3 1/3% sales tax. There are other exclusions listed on the 593 - if you're an LLC, a partnership, etc. I would check that list.

If you pay the tax after all, depending on your circumstances, you may be able to recover most of the money at year's end, but I guess you don't really have time to have your accountant run those numbers.

They waive the tax for DIL and foreclosures.

Since the loan was included in your bankruptcy, you don't have to worry about cancellation of debt income & that tax. So your only issue is going to be capital gains.

If you lived in & owned this rental for 2 out of the last 5 years, you will be able exclude your gain up to 250K based on the principal residence exclusion. Perhaps this is why other short sellers indicate they will have no gain. (Just a guess)

If this rental can't be considered a principal residence, then your tax situation will vary depending on whether or not the loan is recourse. In CA, purchase-money loans are generally not recourse whereas HELOC, refi's and cash-out loans are usually recourse. The gain is calculated differently depending on the nature of the loan.

For short sales, you would use the actual sales price if the loan was recourse, but if the loan was non-recourse & forgiveness of debt was written in as part of the agreement with the lender, then the selling price is the outstanding loan amount. Your gain is the selling price less your adjusted basis.

Would you be better off, tax-wise letting the property go into foreclosure?

Generally speaking, in foreclosures the selling price is the Fair Market Value for recourse loans (This comes from 1099-c box 7 and is the gross bid price @ foreclosure).

For non-recourse loans, the selling price is the loan balance. You subtract your adjusted basis in the property (purchase price + capital improvements - depreciation) from the "selling price" and the result is your capital gain/loss.

In foreclosure/DIL, you don't have the FTB to worry about.

Leave a comment:

HELP needed in CA!! My no-assets Chapter 7 discharge in June, 2010, left me with a rental condo, which is now in short-sale escrow... due to close TOMORROW. The escrow company provided me with a CA 593-E "Real Estate Withholding - Computation of Estimate Gain or Loss" and a CA 593-C "Real Estate Withholding Certificate". My attorney had no idea how to fill them out. I couldn't find any advice here. I met with my accountant, who determined that I have an estimated $102k gain on the sale. CA requires the escrow company to withhold 3.3% of the proceeds, or $9,497. Great, this comes out of the bank's proceeds, right? I faxed the forms to escrow two weeks ago.

Now, the day before closing, my realtor calls and yells at me, saying there has never been a short sale in which the seller has a gain; that the escrow company said "everyone" marks the "seller has a loss or zero gain" box on form 593-C, and if I don't do it too, the deal will fall through. Interestingly, form 593-E states "title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose." The form requires a signature under penalty of perjury. I told the realtor he could forge an "x" in the box if he wants to; that will be his choice. I asked the realtor, "if the withholding isn't taken from the sale proceeds, am I on the hook for $9300 worth of taxes when I file my 2011 taxes?" He said YES.

What do I do? Perjure myself by falsifying the form? Seems this will bite me in the butt when I file my 2011 return. Do I allow the short sale to fail? Should I call the Franchise Tax Board for advice?

PLEASE help... thank you!!

Leave a comment:

Would a short sale benefit a chapter 13 debtor by removing the deficiency and therefore diverting that money to other creditors? In our case, our largest creditor is our student loan's, second largest would be the house deficiency, with the credit cards comprising the rest. If there is no deficiency, the student loan's will get more of a payment and perhaps at least break even against the interest that will continue to accrue through the life of the chapter 13 plan. It seems that in our case a short sale does have positive financial ramifications. Am I misunderstanding something? I'm not concerned about our credit or our future home buying ability, but the deficiency will be tens of thousands of dollars. Obviously it wouldn't matter in a chapter 7.

Leave a comment:

The original information given in this original thread was SPOT on! And the author did mention IRS from 982. That is the from that you use for The Mortgage Forgiveness Act. Most people don't give real substantive advice on short sales because they have their own motives. Be careful! I had a guy call me a couple of days ago and ask me to forward him my bankruptcy clients to do a short sale and I can get paid $2500-$3000 plus title charges. My response, NO THANK YOU!!! I don't see how a short sale in most situations benefit my clients.

Leave a comment:

As a realtor, I thought I would offer my perspective and describe how I help clients who ask me to list their home for a short sale. First things first, the folks who come to me with the desire to do a short sale typically tell me that they have already researched short sales and are simply ready to get started with the process, often because their lien holders are very hard to work with so they have lost all patience with trying loan mods or anything else. I talk with my clients at length to make sure I understand their true issues and I also refer my clients to a CPA to talk about tax issues and a lawyer to discuss legal issues (and often bankruptcy as another option). I do not provide legal advice because I am not a lawyer and I am not looking to get sued :o)

My clients have every possible reason for the cash-flow interuption that makes keeping the home impossible: death in the family, unemployment, pay cuts, out of state transfers, divorce, you name it. They often come to me completely freaked out (one was even talking about ending it all but I got her back to a positive place) and I take a lot of pride in holding their hands and taking them through the process. Many folks simply do not want to do a BK nor do they want a foreclosure. They understand that by doing a short sale, they are attempting to help the lender reduce their loss and for many folks this is important.

Some items I think are very noteworthy:

- When a client gets the final offer from the lien holder as to how they will approve a short sale (at the end of a typically long period of time waiting), I tell my clients point blank if I think the offer is not good for them. This does happen now and then, typically if the client only has one mortgage and the lienholder wants to hold on to deficiency judgement rights. I tell my client if the deal is no good (IMO), get them to check with an attorney to make sure and then I make No Money. And I am fine with that because I do not need to make a paycheck by putting my clients into a bad deal of any kind. As a realtor, I need to help people and to look after their best interests. If a short sale deal turns out at the end to be no good, I tell them so and that is that. And again, I have my clients speak with CPAs and lawyers to make sure they know what they are doing.

- Contrary to the popular myth that is mentioned on this site now and then, you Do Not have to have a hardship to get a short sale approved every time. I have helped clients with very big incomes negotiate a short sale that reduced their exposure to deficiency judgements and ending up closing just like any other short sale. The "real" key to getting a short sale done is to do what my team and I do; provide a compelling reason for the investor who holds the loan to accept the loss (or short) by giving them an offer that is reasonable and mitigates their losses. In my team I use myself for the strategy piece, one of two short sale negotiators to support me and lawyers to handle the legal stuff with the client. At the end of the day, the owner of the loan can choose to:

- Foreclose on this property so it can go to auction where the minimum bid will most likely Not happen and now the unhappy investor gets to own the home/non-productive asset.
OR
- Look seriously at a legitimate short sale offer where the investor can take a loss of a known amount and get his/her money back right away.

When we tell an investor that they can keep the non-performing asset or take the short sale, almost always they say let's do the short sale. My success rate at getting banks/investors to approve short sales is very good but it is based on a team structure and a focus on putting the client first, even before my own paycheck, as both the law and my own ethics dictate.

So, with all that said, I'm still a soon-to-be member of the BK club. After taking in so much good info from this site and speaking with my own BK lawyer, I am now sending many of my potential clients to get a free BK consult Prior to starting the short sale process. I have also found that a BK can be done simultaneously with a short sale (per my BK lawyer) and have done some of those now. While I am not as astute as many of the very sharp legal minds on this site, I do know a bit about short sales and I do respect folks who want to do them but Not do the BK thing. Live and let live... Thanks again to the members of this site, you have all helped change my family's lives for the better!

Leave a comment:

When you closed the short sale you must have signed a affidavit or form stating you are responsible for any deficiency from the loan.

Ask your agent and ask the 2nd mortgage people for a copy of it. Otherwise tell them to shove it. You can also ask them to cease calling and put all of their requests into writing.

Your agent should know if you signed such a form, and the title company also.

That is not the case in every state. In CA, CA is a non-recourse state for purchase money mortgages. In other states, any deficiency may be collected regardless. Their need not be an affidavit of debt, the seller, in a short sale, owes the short amount.

Leave a comment:

After trying to get a loan modification for almost 2 years with no luck, we decided to put our house on the market in April. We decided to go through a short sale in June after we kept lowering the price on our house and still not getting any offers. We had two mortgages with different banks. We didn't have to short the first mortgage, only the second. The second mortgage told us to continue to make my mortgage payments, which we did, even though we couldn't afford it. We charged our other bills and groceries. We were hoping to buy a house again 1 year after our a non-defaulted short sale. We hoped that one year would help us get back on our feet from all of the debt we had accrued trying to stay current on our mortgage. Two weeks after we "sold" the house, the second mortgage called us inquiring on our plans to repay the money we shorted them. We told them that we couldn't afford it and that's why we went through a short sale and are now renting. Now they are threatening to sue us so we have no choice than to file.

When you closed the short sale you must have signed a affidavit or form stating you are responsible for any deficiency from the loan.

Ask your agent and ask the 2nd mortgage people for a copy of it. Otherwise tell them to shove it. You can also ask them to cease calling and put all of their requests into writing.

Your agent should know if you signed such a form, and the title company also.

Leave a comment:

After trying to get a loan modification for almost 2 years with no luck, we decided to put our house on the market in April. We decided to go through a short sale in June after we kept lowering the price on our house and still not getting any offers. We had two mortgages with different banks. We didn't have to short the first mortgage, only the second. The second mortgage told us to continue to make my mortgage payments, which we did, even though we couldn't afford it. We charged our other bills and groceries. We were hoping to buy a house again 1 year after our a non-defaulted short sale. We hoped that one year would help us get back on our feet from all of the debt we had accrued trying to stay current on our mortgage. Two weeks after we "sold" the house, the second mortgage called us inquiring on our plans to repay the money we shorted them. We told them that we couldn't afford it and that's why we went through a short sale and are now renting. Now they are threatening to sue us so we have no choice than to file.

Leave a comment:

Thanks for the info Zania. You hit everything right on the head. Our case is complicated. We've spoken with umpteen mortgage brokers, loan specialists, senior loan specialists, supervisors, etc. Everybody says the same thing..."WOW, you've got quite the situation." The crux for them is that our bankruptcy wasn't necessarily a result of "our own" financial situation, but rather it was more a result of three different tenants. Nevertheless...a bankruptcy is a bankruptcy.

As for pursuing legal ramifications of continuing to pay the mortgage...well that gets even better! When we found out in 2009 that this loan had not been reaffirmed (we hadn't even heard of the term reaffirmation up until that time), we were FURIOUS! I could not believe that for the life of the mortgage, plus ten more years, the mortgage would essentially be a derogatory mark on our credit file because it would ALWAYS report as discharged.

I contacted the attorney's office that handled our BK and boy did they scramble to cover their rears. I was told things like, "We NEVER discuss reaffirmations with our clients because it's never in their best interest." In the end...they turned around and stated that the attorney that actually handled my bankruptcy was not a part of their firm any longer and in fact, he never had been a part of their firm, he was just renting space and apparently borrowing their secretary's help as well.

We retained a second BK attorney to reaffirm the mortgage. After a year of going through that, we finally told him to forget about it. The loan was never officially reaffirmed. This was right around the time that we were denied the HAMP, denied the in-house, learned the property was so severely underwater, and lost one of the tenants. I think the kicker, the straw for me was when one of the supervisor's at Citi (the servicer at the time) rudely told me, "Well Ma'am, perhaps you should think about selling your property."

I don't think I've ever lost it in quite the way I lost it with that woman. All of the stress, the uncertainty and the frustrations came flying out of me. I shouted quite loudly, "DON'T YOU THINK WE WOULD HAVE SOLD THIS PIT IF WE COULD HAVE?!?!" I mean really...we are living in a 700 sq ft apartment with four children that are 5 and under and a dog. If we could have gotten out...we would have. And where exactly would we go? Can't afford to rent in this state, nor would anybody actually rent to us because of RI's lead laws. Most landlords shy away from anybody with young children.

After that...I didn't care anymore. I told the supervisor perhaps she might like to sell it for me and I hung up. Haven't paid a dime on the mortgage since.

Now I know some will see this default as indicating our irresponsibility. Hey...I can understand why some would see it that way. Personally...I don't care anymore. We were forced into this situation by stuff beyond our control and as far as I'm concerned, we've "done our time." This property here...we would be fools to continue to dump money in to it. Should we continue to pay for the life of the loan...it will NEVER be worth what we would ultimately pay after interest, etc. It would have to triple in value and I just can't see it doing that in our lifetime.

So...moving on...now we're moving to western NY and we would like to put the whole ugly mess behind us. The sooner we can get into a single family home, our forever home, the better. Right now, we're investigating whether we can quit-claim my husband off the deed to free him up to go buy a home under USDA. I'll report back when I hear if they'll accept that. It's an interesting venture...but they have to accept his name as being removed only on the county level as his name will still be on the deed-of-trust.

Leave a comment:

First let me say that I wish you the best. And our latter days will be better
than our former days!!!!

You gave a lot of information and I'm not sure I have it right but here is
my understanding:

1. You filed bankruptcy in 2007 because of debt related to an investment
property and you thought that you were discharged of only the
investment property and that you reaffirmed your primary residence.
But the bankruptcy discharged your of your primary and investment properties.

2. So you continued to make payments on your primary residence for
almost 3 more years and tried to do a Loan Modification to keep
the primary but it was denied the Loan Modification

3. You want to relieve legal responsibility of your primary residence
in a manner that doesn't jeopardize your possibility of getting
another primary residence as soon as possible

And here is some feedback/questions

1. Is there no path to get a lawyer and fight your mortgage company
that you wouldn't have
paid mortgage for almost 3 years on a home that you knew was discharged?
Can you talk to your 2007 bankruptcy law firm?

2. This may or may not be related to why they declined your loan if they did
not even run you through their waterfall analysis but if they did run you through their
waterfall analysis then; Loan Modification is driven by a NPV analysis agreed upon by congress
and the mortgage companies. They do an analysis that lets them decide the
net present value of you staying vs letting it go into foreclosure.
Essentially for you they concluded that they would make more money if your
primary when into foreclosure than to let you keep it and "make it more affordable".
And every mortgage company has their own ever changing
formula and scales of the npv difference of which to make their decision.
I know something about this because I worked in the Loan Modification
related business.
You should be able google more about this.

3. As from my experience with my old home deed in lieu is a choice after the
foreclosure process starts? I know it as a "deed in lieu of foreclosure".
It's where you give them the deed quicker but from a credit perspective it does
very similar affect to your home as a foreclosure. Banks do do it to get your deed quicker so they
won't have to spend money to break your
mortgage contract in court to get it aka foreclosure. Can you talk to your
2007 Bankruptcy law firm about this?

4. You can go ahead and start working on a short sale. Get a realtor,
and set close to that 150K neighbor's price and see if you get a buyer.
It's after you get an offer that you go to your bank with a good
short sale real estate lawyer and begin the short sale process.
The quicker you get a buyer the better and then it depends
on how fast your mortgage company will accept or reject the short sale.
I'm not sure how fast they will move to accept or reject because you are
discharged of the debt but they do want the deed so they can sell it if you
can't sell it someone else.
So their interest is getting the deed off their hands and that's also your
interest. A lawyer can answer this that has dealt with short sales where only
the legal aspect of the mortgage is a factor and not the note aspect.

5. If you do do a short sale then there shouldn't be a
deficiency judgement since the notes tied to both properties were
discharged of any responsibility of yours. I discharged of bankruptcy first
and then two weeks later closed on a short sale. I did it in that order
because bankruptcy relieved me of the note aspect of the mortgage and then
the short sale had been in the works and would relieve me of the
legal aspect of the mortgage. Until the the deed was moved over via sale,
deed in lieu or foreclosure then if something happened to my house legally I
would've been responsible for it.

Best to you and your family

Leave a comment:

We were discharged Chapt 7 in April of 2007. IIB was the mortgage for the property that we are currently living in. We *thought* we were still on the hook for the mortgage as the bankruptcy was to relieve us of the debt from a second property (a multifamily) that we owned at the time and that had caused serious financial issues when we had multiple tenant evictions.

So from 2007 on, we continued to pay on the mortgage for this property that we still live in. We found out in 2009 that it had been IIB and not reaffirmed and what this meant for us. That it would never report as a positive on our credit report, despite our on-time payments, that the bank could come and repossess the property any time, and that we had no legal liability for the loan.

We continued to pay the mortgage, on time, through 2009 and most of 2010. Property taxes went up causing a $400/month increase in the mortgage payment, I lost my job and we still struggled along, staying current, but really struggling to do so.

We filed for a modification in April of 2010 and were dragged along by Citi for FOUR months. For weeks, they promised repeatedly that we would begin our trial payments within another week or so. The trial payments would have dropped our payment by about $700/month. August rolled around and we received official word that we were denied the modification on two grounds...1) We'd never been late and therefore were not at risk of default and 2) we had too much in liquid assets. The kicker was that much of the money they were counting as liquid assets isn't actually ours. We had right around 6k overall in the bank...$2k of that was a mortgage payment that had yet to clear, $1500 of the 6k was comprised of tenant security deposits (the house is a multifamily) and almost 1k belongs to our 5 yr old daughter, but because her account is titled in our names, it was counted as part of our liquid assets.

So we were denied both HAMP and an in house modification.

So we stopped paying. The house is 100k underwater and at this point, to continue to dump money into it would be a poor use of financial funds. It's a toxic asset, essentially.

We had thought perhaps they would modify the loan, but they have not even contacted us at all...and last check, foreclosure proceedings haven't even begun.

In the meantime, my husband has been offered a job that requires us to relocate almost 8 hours away. We were hoping to purchase a single family home as houses out there are VERY inexpensive. The bottom line is that we cannot obtain financing (FHA, conventional, etc.) until our names are off of the deed for this property.

We are specifically pursuing a USDA Rural Development loan. I've spoken with some of the senior loan people (all of whom are fascinated by our situation) and they are pretty positive about our ability to be APPROVED for a USDA loan. But...and this is a big but...we cannot close on a USDA mortgage if our name is on the deed for another property.

We have to get rid of this house we own, and fast.

I contacted the servicing lender to see if we could do a deed in lieu. They stated we need to list the property for three months in order to qualify for a deed in lieu.

As I mentioned, the property is severely underwater...so listing the property means it'll have to be a short sale.

Any thoughts on this? Should we push and market aggressively and try to get the short sale done? Or should we just let it sit on the market for three months and then push for the deed in lieu?

If the property short sells, all of our ties to the property are completely severed, correct? We will have no deficiency judgements, no tax issues, right?

What are the costs to us, involved with selling the property at short sale?

Any ideas how long a deed in lieu will take?

The lender is Fannie Mae...the loan servicer is Lender Business Process Solutions (transferred from Citi). Can I contact Fannie directly and angle for a deed in lieu now?

Any suggestions to get the property out of our names more quickly? We absolutely cannot let it foreclose or we will not be able to obtain USDA financing for three years.

We owe 260Kish, the property is valuing on zillow for 150kish and a house up for short sale across the street is listing for 150k. Their house is similar to ours but in tougher shape. It does have more rental units though.